Correlation Between Kinetics Small and Guidemark(r) Small/mid

Can any of the company-specific risk be diversified away by investing in both Kinetics Small and Guidemark(r) Small/mid at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Kinetics Small and Guidemark(r) Small/mid into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kinetics Small Cap and Guidemark Smallmid Cap, you can compare the effects of market volatilities on Kinetics Small and Guidemark(r) Small/mid and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Kinetics Small with a short position of Guidemark(r) Small/mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Small and Guidemark(r) Small/mid.

Diversification Opportunities for Kinetics Small and Guidemark(r) Small/mid

0.47

Correlation Coefficient

Kinetics Small  Guidemark(r) Small/mid

Very weak diversification

The 3 months correlation between Kinetics and Guidemark(r) is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Guidemark Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidemark Smallmid Cap and Kinetics Small is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Kinetics Small Cap are associated (or correlated) with Guidemark(r) Small/mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidemark Smallmid Cap has no effect on the direction of Kinetics Small i.e., Kinetics Small and Guidemark(r) Small/mid go up and down completely randomly.

Pair Corralation between Kinetics Small and Guidemark(r) Small/mid

Assuming the 90 days horizon Kinetics Small Cap is expected to generate 1.39 times more return on investment than Guidemark(r) Small/mid. However, Kinetics Small is 1.39 times more volatile than Guidemark Smallmid Cap. It trades about -0.05 of its potential returns per unit of risk. Guidemark Smallmid Cap is currently generating about -0.18 per unit of risk. If you would invest  21,497  in Kinetics Small Cap on December 2, 2024 and sell it today you would lose (1,555) from holding Kinetics Small Cap or give up 7.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Kinetics Small Cap  vs.  Guidemark Smallmid Cap

Kinetics Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kinetics Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Guidemark Smallmid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guidemark Smallmid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's primary indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Kinetics Small and Guidemark(r) Small/mid

The main advantage of trading using opposite Kinetics Small and Guidemark(r) Small/mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinetics Small position performs unexpectedly, Guidemark(r) Small/mid can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Guidemark(r) Small/mid will offset losses from the drop in Guidemark(r) Small/mid's long position.

The idea behind Kinetics Small Cap and Guidemark Smallmid Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.